FTX bankruptcy hearing: the highlights

So much for winning a “litigation against Delaware.”

FTX’s lawyers this week agreed that the Bermuda bankruptcy will be heard in Delaware, not New York, where it was originally filed. In other words, the turf war ended in a truce.

Unfortunately, Delaware is also a notorious haven for corporate secrets. A counter-argument to criticism of the Blue Hen State is that unlike, say, the Bahamas or the Cayman Islands, the US Department of Justice can invade its borders directly.

But for now, the court has sided with FTX’s representatives through the DoJ’s US Trustee and will keep the crypto exchange’s biggest creditors anonymous. The secrecy will last at least until an evidence hearing on December 16 – and the list could remain permanently blacked out. The arguments FTX made for anonymity deserve a separate post, but for now we’ll just raise an eyebrow.

so what did we learn, aside from moving the NY/Bahamas case to Delaware? First, we learned that Delaware isn’t exactly prepared for hundreds of Zoom participants, many of whom are otherwise extremely online. Officials relied on the honor system to keep callers from turning on their cameras and microphones, which meant that during the court’s only 10-minute break, a couple of guys demanded their money back and at least one unmuted to transfer music. When asked to come forward, one attendee asked who the “boomer” was.

We also learned that the new CEO and the team consider some former employees to be “compromised”. It’s not yet clear what they mean by that, but we have a feeling we’ll find out!

The team (and its new board) also want to sell some FTX-controlled companies as soon as possible. “We believe, Your Honor, that we will be fairly quick to seek to sell certain businesses that we understand are, at least today, self-sufficient and resilient and have attracted the interest of others in the market,” said James Bromley, an attorney from Sullivan & Cromwell, representing the new management of FTX.

We also learned that Sam Bankman-Fried consulted not only with his father, a Stanford Law School professor, but also with his father’s colleague, David Mills, who “classes in criminal law and economic crime.”

More facts about FTX’s customer base, cash reserves and headcount emerged, with some handy charts to boot:

1) customer sites

Aside from traditional tax havens, the UK is tied with China for the highest share of FTX clients. The Cayman Islands and Virgin Islands have larger proportions of clients, but given their status as a tax haven, who knows where the ultimate owners of these accounts end up spending their time.

Congratulations London, you beat Singapore!

2 co-workers

As James Bromley of Sullivan & Cromwell told the judge, we also learned that “approximately 260” employees remain with the company.

Below are FTX employee locations as of the end of October. The Debtor Firms chart on the left contains the number of employees of the Chapter 11 filing firms. The pie chart on the right includes these companies plus the subsidiaries in Australia and the Bahamas.

3) investments

We also have a selection of companies supported by FTX. Sequoia makes the list, our FT colleagues have reported, along with a number of artificial intelligence research firms, IEX and . . . Storybook Brawl video game developer? (See our tombstoNFT for a list of investors.)

4) Liquidity

Finally, we have a nice little recap of the cash the new management team has been able to uncover so far:

Alameda has by far the largest cash reserve as fiat is required to create markets for degens YOLOing in Dogecoin. Note that these amounts do not reflect costs other than those strictly necessary to keep the business running for the next five weeks. Everything else is paused by the bankruptcy.

The full exhibits can be found on PACER or here.

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